Economics Dictionary of ArgumentsHome
| |||
|
| |||
| Cross-subsidization: Cross-subsidization in economics occurs when profits from one product or service are used to subsidize the cost of another. This often happens when a business charges higher prices for certain goods or services to offset the lower prices of others. It can be seen in industries like utilities, where profits from high-demand services help fund less profitable ones. See also Calculation, Profit, Costs, Production, Organisation, Firms, Business._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Economic Theories on Cross subsidization - Dictionary of Arguments
Henderson I 27 Cross-subsidization/Economic theories/Henderson/Globerman: Government ownership allows cross-subsidization whereby higher-income taxpayers and non-users subsidize the consumption of Iower-income people, since the costs of operating state parks and municipal golf courses are not fully covered by the Iow prices charged by the relevant government agencies managing those facilities. Costs: The residual costs of operating the facilities must be covered through revenues raised by taxes and fees levied on residents, many of whom do not use the facilities. Alchian was careful to note that if cross-subsidization is a more prominent social objective than effciency, economists cannot say that government ownership of parks and golf courses is inferior to private ownership.* More generally, private property rights may occasionally be costlier to enforce than the benefits of relying upon them would justify. Equivalently, the costs associated with relying on government property rights might be Iower than the costs of implementing private property rights. An example is public sidewalks. Cross-subsidization: Government ownership allows cross-subsidization whereby higher-income taxpayers and non-users subsidize the consumption of Iower-income people, since the costs of operating state parks and municipal golf courses are not fully covered by the Iow prices charged by the relevant government agencies managing those facilities. In major cities, public streets for pedestrians are often extremely crowded during business hours, causing discomfort and delays for users of the streets. A private owner might charge pedestrians to use the streets with prices calibrated to deter peak levels of crowding. However, charging for street access and denying access to non- payers might be prohibitively expensive if major pedestrian thoroughfares and the streets accessing those thoroughfares were operated as privately owned pedestrian „highways“. ** >Public goods, >Social goods, >Collective Goods. * An important caveat here is that some forms of cross-subsidization are likely to be more effcient than other forms. For example, government-financed education has traditionally been delivered through government-run public schools that are paid for through tax revenues. However, the use of vouchers, paid for through tax revenues and made available to Iow-income families, allows Iower-income people to pay for their children's education at privately owned and operated schools. Many economists believe that children from Iow-income families would receive a better education through a cross-subsidization system that relies on vouchers rather than through the conventional public-school system. ** For an alternate View, though, see Powell (2009, May 4).(1) 1. Powell, Benjamin (2009, May 4). Sell the Streets. Econlib. |
Economic Theories Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
||
Authors A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Concepts A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
